Moneycontrol Pro: Hikal stock in focus, here’s why

Pharma business was flat due to raw material shortages and international logistics issues. While most of the headwinds are transitory, Hikal is enthused by recent opportunities arising from global supply chain destruction and which has strengthened the China Plus theme.

This has led to a higher conviction for capex programme, currently, the company is executing a nearly 600 crore-plus capex programme with asset turns of 1.5 times. A major part of the benefit is expected to come in FY24.

The company has also culminated a 10-year contract, the emerging vertical of the animal health business. These triggers add to the medium-term revenue guidance of 15 to 20 percent compound annual growth rate (CAGR) and with the margin improvement of 50-100 basis points per year.

Coming to valuations, multiples are reasonable and at discount to its peers in the CDMO business, and hence we believe long-term investors can keep a tab on this.